New Zealand Economy


RBNZ loads the gun on macro-prudential tools

By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) governor, Graeme Wheeler, yesterday delivered a speech to the Auckland Institute of Directors suggesting that it is just days away from launching loan-to-value ratio (LVR) limits on mortgage lending, in order allow the RBNZ greater flexibility to lower interest rates and take pressure off


RBNZ targets high LVR lending

By Leith van Onselen Following last week’s Memorandum of Understanding between the Reserve Bank of New Zealand (RBNZ) and the New Zealand Government, the RBNZ has today outlined how it will use macro-prudential policy tools to target high loan-to-value (LVR) mortgage lending – i.e. mortgages where the deposit or equity in the property is less


S&P downgrades NZ banks

By Leith van Onselen Back in March, Standard and Poors (S&P) released a report warning about the increasing risk of a New Zealand property crash and noting that Australia’s Big Four banks, which own New Zealand’s Big Four, would be on the hook in the event that they needed to be bailed-out (my emphasis): In


RBNZ readies macroprudential arsenal

From Banking Day: The Reserve Bank of New Zealand has agreed a memorandum of understanding with Finance Minister Bill English that will give the bank the power to limit low equity mortgages as soon as July. …”These new tools…can promote financial stability by helping to build capital buffers and reduce incentives for speculative behaviour, which can contribute


Unlike Australia, NZ Budget tackles housing affordability

By Leith van Onselen While the major political parties continue to ignore Australia’s highly unaffordable housing, the 2013 New Zealand Budget, released earlier today, announced a variety of measures aimed at boosting supply and improving overall housing affordability. Measures announced included: Introduction of the Housing Accords and Special Housing Areas Bill, which will enable the


IMF warns on NZ housing market

By Leith van Onselen New Zealand house prices surged again in April, with the national stratified median price hitting a record $412,500, but prices in New Zealand’s biggest city – Auckland – falling slightly from last month’s record to $595,500 (see next chart). House price growth across New Zealand is accelerating (see next chart). Nationally,


RBNZ implements macroprudential mortgage limits

By Leith van Onselen It has been well documented on this site that the New Zealand housing market is, once again, facing bubble-like conditions, with prices in its two major markets – Auckland and Christchurch – rising strongly on the back of low interest rates, increasing credit availability, and tightened supply (see next chart). A


Mad NZ property price boom

By Leith van Onselen It’s a sad day for younger non-home owning New Zealanders, with stratified median house prices hitting in excess of $400,000 nationally and $600,000 in Auckland for the first ever time in March, according to data released today by the Real Estate Institute of New Zealand (REINZ). Nationally, New Zealand house prices


Fitch warns on NZ property bubble

Fresh from Fitch this morning: Fitch Ratings-Sydney/Singapore-08 April 2013: Fitch Ratings says that challenges are increasing for New Zealand’s major banks with strong asset growth and fierce price competition potentially leading to asset bubbles. This in turn may impact bank financial strength and place negative pressure on Viability Ratings (VR). In a report published today,


RBNZ: fix housing supply & temper credit

By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) yesterday gave a speech (below) entitled Perspectives on housing, which provided a useful overview of some of the factors driving New Zealand’s housing market and monetary/prudential policy. Below are some key extracts. On housing and the New Zealand economy: The RBNZ notes that New


The war over Auckland land supply hots up

By Leith van Onselen The war over Auckland land supply has continued this week, with the new Minister for Housing, Dr Nick Smith, uping the ante on his promise to smash Auckland’s urban growth boundary (called the “Metropolitan Urban Limit” or MUL). Regular readers might recall that the Auckland City Council had moved to shift


RBNZ cries wolf on mortgage lending

By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) today released its quarterly Statement on Monetary Policy (SoMP), where it kept the official cash rate unchanged at 2.5% and signalled that it would remain on hold until 2014 due, in part, to the ongoing drought, which is expected to lop up to 1%


NZ mortgage war heats up

By Leith van Onselen The competition for mortgage lending is heating up in New Zealand. Last month, government-owned KiwiBank announced that it would drop its six month fixed mortgage rate to just 4.79%, which is reportedly the lowest mortgage rate offered by a New Zealand bank for “many decades”. And today, ASB (owned by the


HSBC sees New Zealand improving

HSBC is out with a quick note on the latest NZ GDP figures, although according to them they are “so late that they are mostly history”: New Zealand’s GDP was weaker than expected, rising by only +0.2% in Q3 (market had +0.4%). Downward revisions meant y-o-y growth slowed to +2.0% (market had +2.5%). Growth was held back


NZ growth slows

New Zealand’s GDP stats came out this morning and have undershot expectations. Economic activity, as measured by gross domestic product (GDP), was up 0.2 percent in the September 2012 quarter, Statistics New Zealand said today. This growth follows revised growth of 0.3 percent in the June 2012 quarter. The main movements by industry this quarter were: construction (up 4.5 percent),


NZ’s economic omen for Oz

By Leith van Onselen Please find below an interesting economics research note from the Bank of New Zealand (BNZ) on the growing economic imbalances developing in the New Zealand economy, which is encapsulated by the -11% fall in exports over the past year and the 33% increase in home sales. The note provides a stark


RBNZ moves to prevent asset bubbles

By Leith van Onselen In April last year, outgoing Reserve Bank of New Zealand (RBNZ) governor, Alan Bollard, muted introducing ‘maco-prudential’ tools to prevent the formation of future asset price bubbles: “[New Zealand needs] to keep preparing for how we might deal with credit and asset price booms when they recur in the future,” Bollard


NZ growth weak, misses forecast

The New Zealand 4Q GDP results were released this morning and looks weak at first glance: The New Zealand economy, as measured by gross domestic product (GDP), grew by 0.3 percent in the December 2011 quarter, Statistics New Zealand said today. This latest result follows economic growth of 0.7 percent in the September 2011 quarter. The


An influx of bros

Following on from the recent release of ABS Data on the “Australian Bogan Exodus“, here’s an article from NZ’s leading financial news and opinion blog, that got me thinking: The exodus of people from New Zealand to live permanently or long-term in Australia continued in February, with net departures across the ditch hitting a new


NZPC hits the mark on housing supply

The New Zealand Productivity Commission (PC) on Friday released its draft report on housing affordability. Below is a video discussing the PC’s draft findings (via The PC report correctly identifies regulatory constraints on land/housing supply as the key impediment to affordable housing. Below are some key extracts from the report discussing the supply-side of the New Zealand housing


Auckland embraces unaffordable housing

Here’s one of the dumbest proposals that I have read in a while. The Auckland Council has released a Draft Plan proposing to change the existing urban growth boundary (called the “Metropolitan Urban Limit” or MUL) into an even tighter “Rural Urban Boundary” that would effectively ban development outside of the rural-urban line and limit


RBNZ gets housing policy right

The Reserve Bank of New Zealand (RBNZ) last week lodged a fascinating submission with the New Zealand Productivity Commission’s Housing Affordability Inquiry which, given the strong similarities between the Australian and New Zealand housing markets (explained in these earlier articles), is highly relevant to Australia. The RBNZ submission is provided below. At only 10 pages


NZ moves to quarantine negative gearing

When it comes to recent banking/housing policy, our Kiwi cousins across the pond have it all over us Aussies. Back in April, I wrote about three policy actions being undertaken by the Reserve Bank of New Zealand (RBNZ) and the New Zealand Government aimed at reducing the economy’s exposure to the housing market and improving financial


RBNZ tells it straight

The Reserve Bank of New Zealand (RBNZ) today released its biannual Financial Stability Report (FSR).  For years, I have been a keen reader of the FSR as it provides an alternate view to the biannual Financial Stability Review released by the Reserve Bank of Australia in March and September. I also follow events closely in


NZ considers new tools to combat housing bubbles

Earlier this month, I wrote about two policy actions being undertaken by the Reserve Bank of New Zealand (RBNZ) and the New Zealand Government aimed indirectly at reducing the economy’s exposure to the housing market. These measures included: the Open Bank Resolution (OBR) Policy, which seeks to protect taxpayers from funding future bank bailouts; and


NZ moves to limit exposure to housing

New Zealand has undertaken two policy actions lately aimed indirectly at reducing the economy’s exposure to the housing market. The first measure, called the Open Bank Resolution (OBR) Policy, has been initiated by the Reserve Bank of New Zealand (RBNZ) and seeks to protect taxpayers from funding future bank bailouts. The OBR is intended to


More on New Zealand’s Deleveraging

Following on from my recent posts on the New Zealand economy (here and here), yesterday’s testimony by Finance Minister  Bill English to Parliament’s Finance and Expenditure Committee confirmed that New Zealand’s economy is facing a prolonged hangover after their borrowing binge in the 2000s. Here’s some of what Mr English had to say (via The recovery is going to continue to have


New Zealand Deleverages (Continued)

Following Wednesday’s post, New Zealand Deleverages: Taste of Things to Come, two important pieces of information have been released supporting my contention that the New Zealand economy is facing a prolonged period of anaemic growth as household’s deleverage following their borrowing binge in the 2000s.  First, data was released on Thursday showing a ‘shock’ rise in unemployment to 6.8% from